Deck 9: Management Control Systems and Responsibility Accounting

Question 1

________ is the logical integration of techniques to gather and report data for planning and control decisions and to evaluate performance.

A)An internal control system
B)A quality control system
C)A financial reporting system
D)A management control system

Answer 1

D

Question 2

Measures of performance do not have to be consistent with organizational goals.

Answer 2

False

Question 3

To increase and improve employees' work efforts in organizations,organizations should link ________ to ________ such as bonuses.

A)motivation; goal congruence
B)managerial effort; key success factors
C)goals; motivators
D)performance measures; personal rewards

Answer 3

D

Question 4

A good management control system must foster ________.

A)goal congruence and employee motivation
B)motivation and responsibility accounting
C)responsibility accounting and managerial effort
D)managerial effort and goal congruence

Question 5

Which of the following statements about performance measures is FALSE?

A)Organizational goals without performance measures do not motivate managers.
B)Every performance measure used to evaluate employees should be consistent with organizational goals.
C)An ideal management control system should include at least one performance measure related to every goal.
D)Performance measures become more specific at higher levels of the organization.

Question 6

To design a management control system that meets an organization's needs,managers must identify what motivates employees,________ and ________.

A)develop performance measures based on these employee motivators; establish a monitoring and reporting structure for the performance measures
B)develop performance measures to encourage managerial effort; establish a monitoring and reporting structure for productivity
C)develop performance measures that meet organizational objectives; establish an accounting system to measure productivity
D)develop performance measures based on goal congruence; establish an accounting system to measure goal congruence

Question 7

Which of the following is NOT a characteristic of a management control system?

A)A management control system aids and coordinates the process of decision making.
B)A management control system encourages the use of only short-term goals.
C)A management control system motivates individuals throughout the organization to act in concert.
D)A management control system measures and evaluates performance.

Question 8

A hotel has the following organizational goal: Increase customer satisfaction of overnight guests by 50%.Which is the best performance measure of the organizational goal?

A)number of new employees trained
B)turnover rate of hotel employees
C)overall rating on guest satisfaction survey
D)percent of guests paying by credit card

Question 9

What is the first and most basic component in a management control system?

A)the organization's long-range budget
B)the organization's goals
C)the stockholders' goals
D)the manager's personal desires

Question 10

The purpose of performance measures is to set direction and to motivate managers.

Question 11

What is the first step in designing a management control system?

A)evaluating management's performance
B)establishing organizational goals
C)preparing financial statements
D)differentiating between profit centers and cost centers

Question 12

The first and most basic component in a management control system is the employee's goals.

Question 13

________ are characteristics or attributes that managers must achieve to drive the organization toward its goals.

A)Nonfinancial performance measures
B)Targets
C)Key success factors
D)Objectives

Question 14

Which of the following statements about managerial effort is FALSE?

A)Managerial effort is the exertion towards a goal.
B)Managerial effort must accompany goal congruence.
C)Managerial effort includes all conscious actions that result in more efficiency and effectiveness.
D)Managerial effort does not have to accompany goal congruence.

Question 15

Which statement about performance reports and variances is FALSE?

A)They are most effective when managers use them positively to encourage employees to improve performance.
B)When they are used negatively,employees will resist and undermine these techniques.
C)These tools should be used to find weaknesses and deficiencies in employees' performance.
D)These tools should be used constructively to influence behavior.

Question 16

A management control system includes the techniques to gather and use information to ________.

A)motivate employee behavior
B)evaluate performance
C)make planning and control decisions
D)all of the above

Question 17

A management control system is a logical integration of techniques to gather and report data and to evaluate performance.

Question 18

Goal congruence exists when ________.

A)short-run goals and long-run goals are the same
B)employees working in their own best interests make decisions that help meet the overall goals of the organization
C)the management control system reflects the organization's goals
D)performance reports are used constructively

Question 19

In the management control system,feedback and learning affect all elements of the system.

Question 20

________ is the drive for some selected goal that creates effort and action toward that goal.

A)Goal congruence
B)Managerial effort
C)Motivation
D)Personal rewards

Question 21

Goal congruence exists when individuals aim at short-term goals and groups aim at long-term organizational goals.

Question 22

Product profitability is a performance measure used to monitor the achievement of the ________ goal.

A)customer satisfaction
B)business process improvement
C)employee turnover
D)financial strength

Question 23

Nonfinancial measures of performance include profit targets and required return on investment.

Question 24

Financial performance measures are often lagging indicators that arrive too late to help prevent problems.

Question 25

Cycle time is a performance measure used to monitor the achievement of the ________ goal.

A)customer satisfaction
B)employee turnover
C)financial stability
D)business process improvement

Question 26

A key driver of performance is the culture within the organization that fosters continual learning and growth.

Question 27

Good performance measures should only focus on long-term concerns.

Question 28

The vast majority of employees are motivated by the same thing.

Question 29

Good performance measures should be reasonably subjective.

Question 30

For most organizations,effective performance measurement requires ________ and ________ measures of performance.

A)rolling; static
B)flexible; static
C)strategic; continuous
D)financial; nonfinancial

Question 31

In most organizational settings,superior ________ performance usually follows from superior ________ performance.

A)financial; nonfinancial
B)nonfinancial; financial
C)financial; strategic
D)nonfinancial; strategic

Question 32

Managerial effort does not necessarily have to accompany goal congruence.

Question 33

Organizational learning may be monitored by measuring employee turnover.

Question 34

Some management experts have said that the only sustainable competitive advantage is the rate at which a company's managers learn.

Question 35

An example of a nonfinancial goal is ________.

A)increase customer satisfaction
B)increase profits
C)increase segment margin
D)increase required return on investment

Question 36

Effective performance measures have all the following characteristics EXCEPT ________.

A)used consistently and regularly in evaluating and rewarding employees
B)readily understood by employees
C)balance long-term and short-term concerns
D)unaffected by the actions of managers

Question 37

________ costs include those costs that a manager's decisions and actions can influence to a reasonable degree.

A)uncontrollable
B)controllable
C)third party
D)allocated

Question 38

________ performance measures are often ________ indicators that arrive too late to prevent problems in organizations.

A)Nonfinancial; leading
B)Nonfinancial; lagging
C)Financial; leading
D)Financial; lagging

Question 39

A well-designed management control system ignores nonfinancial objectives and focuses on financial objectives to develop and report performance measures.

Question 40

Market share and customer survey scores are performance measures used to monitor the achievement of the ________ goal.

A)business process improvement
B)organizational learning
C)customer satisfaction
D)financial stability

Question 41

A responsibility center for controlling revenues and costs is called a revenue center.

Question 42

________ costs provide evidence about a manager's performance.________ costs do not provide evidence about a manager's performance.

A)Allocated; Unallocated
B)Controllable; Uncontrollable
C)Uncontrollable; Controllable
D)Allocated; Third party

Question 43

A responsibility center for which a separate measure of revenues and costs is obtained is called a(n)________.

A)cost center
B)contribution center
C)contribution margin center
D)segment

Question 44

The following information pertains to the East Division of Saturn Company: Variable costs:
Fixed costs:
The contribution margin is ________.

A)$7,100
B)$7,700
C)$8,000
D)$8,700

Question 45

A(n)________ cost is any cost that management cannot reasonably affect within a given time span.

A)controllable
B)quality
C)uncontrollable
D)opportunity

Question 46

The following information is available for Half Price Books Inc.and its two divisions,Books and Periodicals: Fixed Costs Controllable
Fixed Costs Not Controlled
Variable Costs:
What is the contribution margin for the Periodicals Division?

A)$29,600
B)$32,600
C)$36,600
D)$43,00

Question 47

Responsibility accounting includes ________.

A)identifying what parts of the organization have primary responsibility for each action
B)developing performance measures and targets
C)designing reports of measures by responsibility center
D)all of the above

Question 48

Responsibility center managers are often able to explain their center's ________ costs even when they are not responsible for those costs.

A)avoidable
B)uncontrollable
C)controllable
D)allocated

Question 49

The entire firm may be a responsibility center for the firm's president.

Question 50

Managers in profit centers are responsible for controlling ________ and ________.

A)costs; invested capital
B)revenues; invested capital
C)revenues; costs
D)expenses; invested capital

Question 51

The manager of a(n)________ responsibility center is responsible for the income and invested capital from the center.

A)profit
B)cost
C)investment
D)accounting

Question 52

A set of machines may be a responsibility center for a production supervisor.

Question 53

A(n)________ center is NOT a type of responsibility center.

A)investment
B)profit
C)cost
D)budget

Question 54

The following information is available for Paperback Books Inc.and its two divisions,Books and Periodicals: Fixed Costs Controllable
Fixed Costs Not Controlled
Variable Costs:
What is the contribution margin for the Books Division?

A)$15,000
B)$20,000
C)$32,500
D)$42,500

Question 55

The term "cost center" may be used to describe responsibility centers that are assigned responsibility for capital investment.

Question 56

In a(n)________ center,managers are responsible for costs only.

A)profit
B)cost
C)investment
D)accounting

Question 57

A ________ refers to the set of activities assigned to a manager or a group of managers or other employees.

A)internal control system
B)management control system
C)responsibility center
D)quality control report

Question 58

Which of the following statements about responsibility centers is FALSE?

A)Responsibility centers usually have one goal.
B)Management control systems monitor responsibility center goals.
C)Responsibility centers are usually classified according to their managers' primary financial responsibility.
D)Cost centers,profit centers and investment centers are all examples of responsibility centers.

Question 59

Costs uncontrolled by a segment manager should be ________ when evaluating the performance of the segment manager.

A)considered
B)weighed heavily
C)weighed lightly
D)ignored

Question 60

The following information pertains to the West Division of Burger Company: Variable costs:
Fixed costs:
The contribution margin is ________.

A)$2,750
B)$3,650
C)$4,350
D)$2,500

Question 61

Segments are responsibility centers for which a separate measure of revenues and costs is obtained.

Question 62

The following information pertains to the Lower Division of Peapod Company: Variable Costs:
Fixed costs:
The contribution controllable by a segment manager is ________.

A)$7,100
B)$7,700
C)$11,100
D)$12,700

Question 63

To calculate the contribution by segment,take contribution controllable by segment managers minus ________.

A)unallocated costs
B)variable operating expenses
C)fixed costs controllable by others
D)fixed costs controllable by segment managers

Question 64

The following information pertains to the Southern Division of Bama Company: Variable Costs:
Fixed costs:
The contribution by segment is ________.

A)$2,350
B)$2,500
C)$2,750
D)$3,350

Question 65

The contribution margin is especially helpful for predicting the impact on income of long-run changes in activity volume.

Question 66

The following information is available for Discounted Supplies Inc.and its two divisions,Durable Goods and Nondurable Goods. Fixed costs controllable by
Fixed costs not controlled by
Variable costs:
What is the income before taxes for the company as a whole?

A)$15,000
B)$29,600
C)$33,600
D)$34,600

Question 67

The following information pertains to the Upper Division of Yoko Company: Variable Costs:
Fixed costs:
The contribution by segment is ________.

A)$7,100
B)$7,700
C)$8,700
D)$11,100

Question 68

No cost is completely under the control of a segment manager.

Question 69

The following information is available for Price Supplies Inc.and its two divisions,Durable Goods and Nondurable Goods. Fixed costs controllable by
Fixed costs not controlled by
Variable costs:
What is the contribution controllable by the manager of the Nondurable Goods Division?

A)$29,600
B)$32,600
C)$36,000
D)$36,600

Question 70

The following information is available for Discounted Supplies Inc.and its two divisions,Durable Goods and Nondurable Goods. Fixed costs controllable by
Fixed costs not controlled by
Variable costs:
What is the contribution controllable by the manager of the Durable Goods Division?

A)$20,000
B)$32,500
C)$35,000
D)$42,500

Question 71

Responsibility centers usually have a single goal that the management control system monitors.

Question 72

To calculate income before taxes for a segmented company as a whole,take contribution by segments and subtract ________.

A)allocated costs
B)unallocated costs
C)costs controllable by segment managers
D)costs controllable by third parties

Question 73

The following information is available for Discounted Supplies Inc.and its two divisions,Cheap Goods and Expensive Goods. Fixed costs controllable by
Fixed costs not controlled by
Variable costs:
What is the contribution by segment for the Expensive Goods Division?

A)$28,600
B)$29,600
C)$32,600
D)$36,600

Question 74

The following information is available for Discounted Supplies Inc.and its two divisions,Small Supplies and Large Supplies. Fixed costs controllable by
Fixed costs not controlled by
Variable costs:
What is the contribution by segment for the Small Supplies Division?

A)$15,000
B)$20,000
C)$32,500
D)$42,500

Question 75

Which is NOT a fixed cost controllable by a segment manager?

A)salespersons' salaries for segment
B)advertising costs in local paper to promote segment
C)training costs for new employees at segment
D)segment manager's salary

Question 76

When preparing segmented income statements,fixed costs controllable by others,and not the segment manager,include ________.

A)depreciation on building used by a segment
B)local advertising costs for a segment
C)local promotion costs for a segment
D)salary of supervisor of sales staff for a segment

Question 77

A profit center can exist in a nonprofit organization.

Question 78

The following information pertains to the Southern Division of Peapod Company: Variable Costs:
Fixed costs:
The contribution controllable by a segment manager is ________.

A)$2,350
B)$2,500
C)$3,000
D)$3,350

Question 79

Evaluations of the responsibility center manager's performance should ignore uncontrollable costs.

Question 80

Segment contribution margin less ________ describes the segment contribution that is controllable by segment managers.

A)fixed costs controllable by segment managers
B)fixed costs not controlled by segment managers
C)unallocated costs
D)uncontrollable costs